A For Sale sign on the lawn looks like the end of a family dispute. Usually it marks the start of a new set of decisions. Which spouse deals with the agent? What is a fair listing price if one of you wants out quickly and the other wants top dollar? Who keeps paying the mortgage until closing? And when the lawyer has the sale money in hand, who gets it?
For many separating couples in Brampton, the home holds most of what they own, and neither spouse can carry it alone on one income. A sale may therefore be the sensible choice. Done carefully, it turns a contested asset into a sum of money that can be divided or held. Done carelessly, it can leave you with a tax bill, a dispute over the proceeds, or a transaction a court might later undo.
This is general information, not legal advice. Facts such as who is on title, whether you are married, and whether there are children can substantially change the answer, so please get advice on your own situation before signing a listing agreement.
First, work out which rules apply to you
Two questions shape everything that follows: are you married, and whose name is on title?
Married, on title together. You are co-owners, and the Family Law Act also treats the property as a matrimonial home if you were living there as a family when you separated. Both of you will sign the sale documents.
Married, title in one name. The owner cannot simply sell. Section 21 of the Family Law Act says no spouse may dispose of or encumber an interest in a matrimonial home unless the other spouse joins in or consents, the other spouse has released their rights in a separation agreement, a court order authorizes the transaction or releases the property, or a narrow exception about registered designations applies. If a spouse breaks that rule, the transaction can be set aside unless the buyer acquired the interest for value, in good faith and without notice.
Common-law, on title together. You are co-owners under ordinary property law. The matrimonial home provisions of the Family Law Act do not apply, since they protect only married spouses.
Common-law, title in one name. The owner generally can sell, and the other partner may have no automatic right to stop it. They may have a claim based on contributions to the property, such as unjust enrichment, and a court may in some cases allow a certificate of pending litigation to be registered on title while that claim is decided. If you are in this position, speed matters. Talk to a lawyer before the home is sold.
Family members on title. Homes held with parents or siblings are common in Brampton, often because a parent helped qualify for the mortgage. In that case, the other owners must usually be part of the sale, and there may be a dispute about who beneficially owns what. Do not assume the title tells the whole story.
If you both want to sell
Agreement on the idea of selling is a good start, but it is worth putting the details in writing before you list. A short agreement, or a section of a broader separation agreement, can address:
- who the listing agent will be, and how you will both receive updates
- the listing price, how it can be reduced, and what offer you must accept
- who will have the home ready for showings, and who pays for repairs and staging
- who pays the mortgage, property tax, insurance and utilities until closing
- whether one spouse will move out, and when
- which real estate lawyer will close, and what happens to the net proceeds
Be careful about the final point. Spouses who are on good terms at the listing stage may not be on good terms when a large sum of money appears. It is usually a mistake to leave this for later.
Each of you may also need a clear line of communication with the agent. If only one spouse speaks with the agent, the other may feel left out, and will be harder to convince on any price reduction. A shared email thread is a simple fix. Where there has been violence or serious conflict, arrangements can be made so that you do not have to be in contact, or at the house, at the same time.
If only one of you wants to sell
This is where people often assume that the spouse who wants to stay can block the sale indefinitely. As a rule, that is not correct where the home is jointly owned.
Under Ontario’s Partition Act, a co-owner of land can ask a court to order the property partitioned or sold. Since a house cannot be split into two pieces, the remedy is normally a sale. Ontario courts have long treated a co-owner as having a strong starting right to this remedy. The Court of Appeal’s decision in Silva v. Silva (1990) is the case most often cited in family cases. It is generally understood to mean that a court should not delay a sale simply because the property issues have not yet been finalized, though the sale should not prejudice a spouse’s rights under the Family Law Act. A spouse who resists a sale usually has to point to something specific, such as a real risk to a claim or conduct that is malicious or oppressive.
There are several situations in which a sale may be delayed or refused:
- Exclusive possession. A spouse may ask for exclusive possession under section 24 of the Family Law Act, and if a court grants it, a sale would have to fit with that order. Courts often consider the best interests of the children, including the disruption of a move, and the availability of other affordable housing.
- Timing and children. A judge may be persuaded to delay a sale, for example, until the end of a school term, if there is a good reason and the finances allow it.
- A proposed buyout. If one spouse has the means to buy the other out at fair market value, a court may be open to a period for doing so. An unsupported hope of refinancing is less persuasive.
- Financial risk. A court may be concerned if the proceeds might disappear. It can often deal with that by ordering the money held in trust, rather than by stopping the sale.
Where one spouse is on title alone, section 23 of the Family Law Act also lets a court authorize a sale if the other spouse cannot be found, is incapable of consenting or is unreasonably withholding consent.
These are usually brought as motions, and are heard in the Superior Court of Justice at 7755 Hurontario Street, since it is the court with authority over property claims. Evidence about the mortgage status, ability to pay, and the children’s circumstances will matter more than general complaints about the other person.
Who keeps paying before the sale
The mortgage lender does not care that you have separated. If your names are on the mortgage, each of you is typically responsible for the whole debt until it is paid off, and a missed payment could affect both credit scores and eventually lead to a power of sale. If nobody can cover the payments, you should talk to the lender early, and consider listing sooner.
Keep a record of who pays what after separation. When one spouse pays the mortgage on a jointly owned house while the other lives elsewhere, that may later lead to a credit or adjustment. In the other direction, a spouse who moved out might ask for “occupation rent” from the spouse who stayed. Courts decide these claims on the circumstances, and occupation rent is by no means automatic. Writing down the arrangement, such as “these payments are without prejudice to any later adjustment,” can avoid a fight.
Where the money goes on closing
People are often surprised to learn that a sale does not determine what each spouse will eventually receive. Selling turns a house into cash, but it does not perform the equalization calculation.
Suppose, as a hypothetical, that a jointly owned home in Springdale nets $400,000 after the mortgage, commissions and legal costs. It would be natural to give each spouse $200,000. But if one spouse owes the other $90,000 on equalization because of a pension or a business, an even split at closing may be the wrong result. That is why net proceeds are often held in trust by a lawyer until the spouses agree in writing or a court orders their release.
Some practical points:
- Partial releases. Spouses can agree to release part of the funds, such as an equal amount to each, to pay for new housing, and keep the balance back until property is settled.
- Court orders. A judge may order proceeds to be held, or may release a portion. Section 12 of the Family Law Act allows orders restraining depletion and for preserving property where necessary to protect the other spouse’s interests.
- Debts that come off first. A joint line of credit, a mortgage penalty and unpaid taxes may reduce the money available. Ask your lawyer for an estimated statement of adjustments before you plan your next move.
- Deadlines. A sale does not stop the time limits. An equalization application must generally be brought within two years of a divorce or six years of separation, whichever comes first.
The sale price may also differ from the value that is used in the equalization calculation. The net family property calculation generally looks at value as of the valuation date, usually the date of separation, so a later market rise or fall can raise difficult questions about who bears it. A real estate appraisal, obtained early, can be useful, even if you intend to sell.
Keep in mind that a court’s handling of a matrimonial home differs from that of other assets. Someone who owned the home before marriage generally cannot deduct its value at the date of marriage if it was still the matrimonial home at separation. It is a common and expensive misconception to assume otherwise, so have this checked before you decide what your share should be.
Tax questions worth asking
If your home has been your principal residence for every year you owned it, a gain on sale is generally not taxed. The Canada Revenue Agency still requires you to report the sale and the designation on your tax return, using Schedule 3 and Form T2091(IND). Each of you should report it if you were both owners.
There are situations where the answer is less tidy, and many of them are common in this area:
- A rented basement or second unit. If part of the house was used to earn income, part of the gain may be taxable, depending on factors such as structural changes and whether capital cost allowance was claimed.
- Two properties. A family unit can generally only designate one home as a principal residence for a given year. After separation, this can change, and the rules are technical.
- A home owned for a short time. The CRA’s rules on flipped property generally treat a gain on a home held for under 365 days as business income, though a separation is one of the listed life events that can provide an exception.
An accountant should review any of these before you agree how the money will be divided. If a future tax bill is likely, your separation terms should say who pays it.
Selling or a buyout?
Before you commit to a sale, consider whether one spouse could buy the other out. A buyout means no commission and no moving day for the children, and it may suit a parent who wants them to stay in the same school area. It also requires a current appraisal, a mortgage in the name of the spouse who stays, and a release of the departing spouse from the old mortgage. Without that release, the departing spouse could remain liable on a debt for a house they no longer own. Check too whether land transfer tax, legal fees or a mortgage penalty will apply, as some of those costs can be affected by the way a transfer is structured under a separation agreement.
A buyout only makes sense if the spouse who stays can really afford the home. A lender’s approval does not necessarily mean the monthly budget works once support, child care and insurance are all considered. Take a hard look at those numbers before you say yes.
Before you sign anything
Do not sign a listing agreement, a mortgage renewal, a refinancing or a spousal consent without reading it carefully, and preferably without first getting independent legal advice. Do not make a false statement about whether a property is a matrimonial home. Tell your real estate lawyer early that the sale is part of a separation, because that may affect how the file is handled.
Our family law practice page provides an overview of how property issues fit into a separation, and our divorce page explains how those issues are usually handled in a divorce. If a sale is on the table, or the other side is pressing for one, you can contact our office so that the terms are considered before the sign goes up.